Life insurers will be banned from using genetic test results for underwriting purposes after the Senate voted to pass legislation implementing the reform.

Financial Services Minister Daniel Mulino says the prohibition will apply to all life insurance contracts made from six months after the law is enacted.

The Australian Securities and Investments Commission will oversee the regulation, with penalties of up to $1.65 million for insurers that fail to comply.

Since 2019, the life insurance industry has operated under a voluntary moratorium that effectively restricts the use of genetic testing in underwriting.

The Council of Australian Life Insurers has supported the reform, saying it will encourage more people to undergo genetic testing to identify and manage health issues.

“For years, we have been clear that no one should be deterred from taking a genetic test that gives them more information about their overall health,” council CEO Christine Cupitt said.

“As life insurers, we want people to access the information they need to make informed choices about their health and to manage it proactively.”

Mr Mulino says the legislation ensures people are not “discouraged from undertaking genetic testing out of fear it may have an impact on their ability to get insurance, or make that insurance unaffordable”.

The ban does not stop people voluntarily providing genetic test results to their insurers or limit insurers’ ability to make underwriting decisions based on existing symptoms or diagnosed diseases.

Clyde & Co insurance partner Jessica Thurtell says while some people “may obtain life insurance following a concerning genetic test result (and ultimately potentially increase premiums for the whole insured pool), this is likely outweighed by the benefit of people being able to proactively look after themselves and potentially minimise future cost to the community and insurers by doing so”.

The legislation will be subject to review every five years, which CALI says will help it keep pace with advances in predictive genetic testing.